tybs
10-Year Auction Prices Below 2.5% For The First Time Since 2017
Showing a robust demand for non-direct/foreign ownership'
whether this is real demand or currency conversion remains to be seen.
(Keep in mind that Primary Dealer's MUST buy these in order to keep the status of a Primary Dealer with the FRB)
Following yesterday's subpar 3Y auction, today's 10Y, $24 billion reopening of Cusip 6B1 was nothing short of stellar.
Pricing at a high yield of 2.466%, well below last month's 2.615%, this was the first bond auction to price below 2.50% since December 2017, and also stopped through the 2.476% When Issued by 0.1 basis point.
The internals were impressive as well: the Bid to Cover of 2.55 dropped from 2.59 last month, but was still above the 2.45 six auction average. Notably, amid concerns that foreigners are stepping away from US paper, Indirects took down a healthy 68.4%, well above the 64.5% recent average, if modestly below last month's 69.4%. More importantly this was toward the high end of the historical range, with just a few auctions pricing in the 70%+ Indirect range. And with Directs taking down 12.0%, modestly above the six auction average, Dealers were left with 19.6% of the auction, the lowest since March 2017.
Overall, a very strong auction and certainly refuting any speculation that at least in April, foreigners had any particular desire not to participate in US Treasury auctions.
https://www.zerohedge.com/news/2019-04-10/10-year-auction-prices-below-25-first-time-2017
nabby time soon
FOMC Minutes Show "Patient" Majority Expect Rates On Hold, Concern Over Flat Yield Curve
Alternative title: "FOMC Minutes show market is now in charge"
Since the uber-dovish flip-flop of The Fed on March 20th, the long-end of the US Treasury curve has outperformed all other asset classes
The dollar and gold are also higher along with The Dow as we note that the yield curve flattened dramatically before rebounding back to almost unchanged.
And mirroring the yield curve, the market's expectations for Fed rate-changes in 2019 plunged (dovishly right after the March FOMC) only to rebound hawkishly in recent weeks.
Recall the FOMC held rates steady, forecast no additional hikes this year and announced plans to end balance sheet shrinkage in September, and as Bloomberg reports, that led markets to price in interest rate cuts by next January. The minutes could push back against those expectations for actual cuts as the committee lays out conditions needed for a cut – or a hike.
Bloomberg Chief U.S. Economist Carl Riccadonna warned that "an important focal point of the minutes will be to determine the extent to which Fed officials expect the sources of recent economic weakness to be transitory. This, in turn, will signal how they might respond to signs of firming hiring, consumption and output ahead of the Fed’s next rate decision on May 1."
All eyes will be on any signal of rate-change direction (after Powell said in the last press conference, he didn’t know whether the central bank’s next move would be to raise or lower its short-term benchmark rate), as well as what to expect when the balance sheet run-off ends.
The Minutes highlighted a sheepishly dovish FOMC:
*FED MAJORITY SAW RISKS WARRANTING RATES ON HOLD THROUGH 2019
*SOME FED OFFICIALS SAW FURTHER MODEST INCREASE LATER THIS YEAR
*FED OFFICIALS SAW `SIGNIFICANT UNCERTAINTIES' AROUND OUTLOOK
*SEVERAL FED OFFICIALS CONCERNED YIELD CURVE WAS QUITE FLAT
*SEVERAL FED OFFICIALS POINTED TO INCREASED DEBT, LEVERAGE
On the yield curve:
"Several participants expressed concern that the yield curve for Treasury securities was now quite flat and noted that historical evidence suggested that an inverted yield curve could portend economic weakness;"
On what "patient" means:
"Several participants observed that the characterization of the Committee’s approach to monetary policy as ‘patient’ would need to be reviewed regularly as the economic outlook and uncertainties surrounding the outlook evolve."
"A couple of participants noted that the ‘patient’ characterization should not be seen as limiting the Committee’s options for making policy adjustments when they are deemed appropriate."
Finally, on the bright side, Treasury Secretary Steven Mnuchin said he was right to recommend Jerome Powell as Federal Reserve chairman despite President Donald Trump’s frequent criticism of the central bank leader.
“I don’t feel like I picked the wrong person,” Mnuchin said Wednesday in an interview on CNBC.
“But I respect the president’s views and his views of the economy, where he’s had tremendous insight.”
https://www.zerohedge.com/news/2019-04-10/fomc-minutes